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    • 1099 reporting requirements

    The last year has seen the enactment of dramatic changes to Form 1099-MISC reporting requirements, and also the unfolding of a series of challenges to those changes. Payers must be alert throughout 2011 for additional developments that may affect what is reportable in 2012. Innovative Accounting Management wants to make sure all of our clients that may be exposed to these new regulations are aware of any filing requirements you may have.

     Form 1099 series is used to report various types of income other than wages, salaries, and tips (for which Form W-2 is used instead). Examples of reportable transactions are amounts paid to independent contractors for services. In 2011 the requirement has been extended by the Small Business Jobs Act of 2010 to payments made by persons who receive income from rental property.

     The form needs to be supplied to any person who received over $600.00 in payments for rents and/or services in the course of business. The company is responsible for collecting Form W9 from each contractor and retaining with the company records for proper recording.

    In March of 2010, section 6041 of the federal tax code was amended to increase the types of payments and payees for which Form 1099-MISC reporting is required. However, the President signed a repeal bill (April 14), officially enacting the repeal of those expanded 1099-MISC reporting requirements.

     The IRS has been actively pursuing 1099 reporting and challenging employee vs. sub-contractor claims with small businesses. The penalties for non-compliance have been increased.

    For more information, please feel free to contact our office to make sure you are in compliance with the reporting requirements or if you need assistance preparing Form 1099 for this year.

    Avoid the Increased Form 1099 Penalties

     The Small Business Jobs Act increased the monetary penalties for errors and failures in tax information return filing, effective for forms filed with the IRS and statements furnished to payees for 2010 and later years. The increases in penalties are significant:

    1. For failure to timely file a correct return, $100 each (formerly $50), to a maximum of $1.5 million for a year
    2. For failure to file a correct return, but filing a correction within 30 days, $30 each (formerly $15), to a maximum of $250,000 for a year
    3. For failure to file a correct return, but filing a correction by August 1 of the same year, $60 each (formerly $30), up to $500,000 for a year
    4. For failure to file a correct return and a finding that the payer showed intentional disregard of the filing requirements, the greater of $250 per form or 10% or the aggregate amount of the items required to be reported, with no cap on the penalty amount for the year
    5. For failure to timely furnish a correct statement to the payee (the payee copy), $100 each statement, up to $1.5 million for the year
    6. For failure to furnish a correct payee statement but furnishing a correction within 30 days, $30 per statement, up to $250,000 for the year
    7. For failure to furnish a correct payee statement but furnishing a correction by August 1 of the same year, $60 per statement, up to $500,000 for the year
    8. For failure to furnish a correct payee statement and a finding that the payer showed intentional disregard of the requirements, $250 per statement, with no cap on the maximum penalty for the year

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